Illinois governor eyes bonds to pay off growing bill pile

Thu Nov 15, 2012 6:13pm EST

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* Supermajority allows Democrats to approve GO bonds

* Bill backlog at $5.9 billion at the end of September

CHICAGO Nov 15 (Reuters) - Illinois' pile of unpaid bills is growing and Governor Pat Quinn is eyeing another run at a plan to sell bonds to help pay it off, state officials said on Thursday.

Jerry Stermer, the state's budget director, brought up the matter at a legislative hearing on Thursday, although Quinn's office said he was reiterating an interest in working with state lawmakers.

"While the governor has always been interested in refinancing as an option to help pay down old bills, there is no new plan on this issue right now," said a statement from Quinn's office.

In 2011, Quinn, a Democrat, pushed to sell $8.75 billion of 15-year bonds to pay bills that would otherwise be pushed into a new fiscal year, exacerbating Illinois' structural budget deficit. But even a smaller version of the plan that called for $6.2 billion of seven-year general obligation bonds failed to pass amid Republican opposition.

The Nov. 6 general election boosted the ranks of Democrats in the House and Senate, theoretically giving them the three-fifths majority vote required to authorize GO bonds.

A bill introduced by Democratic lawmakers in the House last week would allow for the sale of $4 billion of bonds with proceeds earmarked for bill payments.

BILL BACKLOG IS GROWING

Meanwhile, the state's unpaid bill pile, which stood at about $8 billion when fiscal 2012 ended on June 30, is growing at a faster pace than last year, Illinois Comptroller Judy Baar Topinka reported on Thursday.

The comptroller's report for the first quarter of fiscal 2013 showed a bill backlog of $5.9 billion at the end of September, up from $3.8 billion in September 2011. By the end of October, the current backlog jumped to $6.5 billion.

Brad Hahn, a spokesman for the comptroller, said the increase was due to bills coming in from state agencies at a faster rate than last year. At the same time, monthly payments to public pension funds are bigger than in the previous fiscal year and revenue is not high enough to keep up, he added.

General funds revenue was up 7.1 percent or $529 million in the first quarter compared to the same period in fiscal 2012, according to the report, which warned that bill payment delays will continue.

The nagging bill backlog and escalating pension payments have severely eroded Illinois' fiscal situation, leaving it with low credit ratings relative to other states.

A report last week by the Chicago-based Civic Federation, a government finance watchdog group, said the unfunded liability for the state's five public pension funds jumped to $96.8 billion at the end of fiscal 2012 from $83 billion at the end of fiscal 2011. The state's funded ratio declined to 39 percent from an already low 43.3 percent, the report added. A funded ratio of 80 percent is considered healthy.

Quinn Administration is pushing lawmakers to take up pension reforms during a lame-duck session in January.

"We are focused on comprehensive pension reform to rescue the system, ensure public employees have access to benefits and prevent out of control pension costs from eating up core services like education and healthcare," the governor's office said.

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